The Swiss franc could see a slight boost if Switzerland manages to secure a trade deal with the United States before the Thursday deadline, according to Commerzbank. Without a deal, Switzerland risks facing a 39% tariff on its exports to the U.S. Commerzbank expects the Swiss government to present a “better offer” to avoid this outcome.

Costs of a Trade Agreement

Commerzbank believes a costly agreement will likely be reached but it may end up being pricier than previously thought. This agreement is expected to support the franc and keep the EUR/CHF rate near 0.9300. If trade tensions worsen and no deal is made, the franc could feel more pressure. With the deadline approaching, the implications are significant, affecting both Swiss exporters and broader currency trends across Europe. With only two days left until Thursday, August 7th, we are monitoring for a last-minute trade agreement between Switzerland and the United States. The threat of a 39% tariff on Swiss exports creates considerable uncertainty and has driven the franc’s recent movements. Since the U.S. is Switzerland’s largest export market, having accounted for over CHF 65 billion in goods last year, Swiss officials are likely to work hard to finalize a deal. The costs of not reaching an agreement are too high to ignore, so we expect an improved offer from Switzerland to emerge before the deadline.

Currency and Trading Strategies

For traders, this indicates we can expect a small rebound for the Swiss franc this week. The currency has faced pressure, with USD/CHF rising nearly 2% over the past three weeks to around 0.9050. A trade agreement would likely reverse some of these recent losses. One strategy to consider is using short-term call options on the franc, which would profit from a sudden rise in value. Implied volatility for August options has jumped over 15% recently, reflecting market concerns. This suggests that, while options are more expensive, a significant market move is anticipated. However, if negotiations fail, the franc may face renewed selling pressure. In that case, EUR/CHF could break its recent range around 0.9300 and rise sharply. Traders should be prepared for this scenario, although it’s less likely. We observed a similar volatility pattern in the franc during the last stages of the EU framework negotiations in 2021. Historically, the currency reacts strongly to major trade policy updates. The current situation with the U.S. appears to be following this trend closely. Once the deadline passes this week, focus will likely shift back to the Swiss National Bank’s policies. Even if a trade deal is reached, any strength in the franc could be short-lived if inflation data later this month indicates further cooling. The SNB has already cut rates twice since early 2024, and another cut this year remains a possibility. Create your live VT Markets account and start trading now.

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